About UCLA Anderson Global Supply Chain Blog
This blog is developed by the Decisions Operations and Technology Management (DOTM) Faculty at the UCLA Anderson School as well as special guests. It is intended to report, analyze, and comment on events that relate to current Global Supply Chain Management issues. Each blog is presented in English, (Simplified) Chinese, and (Castilian) Spanish, and it can take one of the following formats:
(a) An Interview -- the author formulates questions about a current issue, and the interviewee provides commentary.
(b) An insight -- the author provides insights concerning global supply chains, including current events.
(c) An analytical piece -- the author analyzes a particular supply chain issue and formulates descriptive and/or prescriptive views.
For more information on the blog contributors, check the DOTM website.

The illegal supply chains for producing and selling counterfeit and stolen drugs are growing rapidly and profitably world-wide. To reduce production cost, many US pharmaceutical companies purchase active ingredients from overseas and/or produce the drugs overseas. According to the US subcommittee’s report, 40% of the drugs sold in the US are made overseas, and 80% of the active ingredients are imported from overseas. Without careful track and trace capabilities, drug safety can be a serious safety problem because many illegal drugs do not contain the right ingredients or the right dosages. For example, US government allocated US$ 2.5 billion between 2006 and 2012 to fight Malaria in Africa that kills 600,000 annually. Despite Novartis’ efforts in distributing its malaria drug (Coartem) on a non-profit basis, they discovered most of the drugs were stolen and then resold in the black market and counterfeited Coartem was sold throughout Africa. In many instances, counterfeited drugs can be deadly and stolen drugs were not effective because they were not stored and transported with proper temperature control.[1]

Illegal and Counterfeit Medicines from Sellers at an Angola Market.

What are the underlying reasons for the rapid growth of illegal drug supply chains? There are four reasons that facilitate this perfect storm. First, as more pharmaceutical companies are purchasing ingredients or importing drugs from various developing countries, these suppliers or contract manufacturers can eventually develop counterfeit drugs. Second, online pharmacies create golden opportunities for selling counterfeit drugs without being exposed easily. As of 2013, there were over 35,000 online pharmacies and 97% of them did not comply with US laws. Third, these online pharmacies enable many American to buy drugs at lower prices without prescriptions. It was reported that 36 million Americans (1 out of 6 Americans) purchase drugs without proper prescriptions in 2013. Fourth, due to an outdated US law established in 1938, the punishment for selling counterfeit drugs is surprisingly light: a maximum fine of $10,000 and 3 years of imprisonment. With high demand and high profit margins and light punishments, no wonder illegal drug supply chains are everywhere!

How can US government fight illegal supply chains? I can think of three possible solutions. First, flood the market. Perhaps pharmaceutical companies can lower its price to make it difficult for illegal drug supply chains to sustain their profitable operations. This approach was shown to be effective when authentic musical CDs were sold at a very low price in China, which forced counterfeit CD makers exit the market. Second, punish illegal drug sellers and buyers heavily. To control the demand, US governments should impose harsher punishments for those who purchase drugs without prescriptions and for those who sell drugs without prescriptions. Third, use online / mobile track and trace capability to fight back. To enforce prescriptions for buying and selling drugs, US government should leverage the internet capability and the on-going electronic medical record initiative to improve the track and trace capabilities. At the same time, US government should work with pharmaceutical companies to develop simple ways (e.g., a mobile app) for consumers to authenticate drugs and encourage consumers to report counterfeit drugs. After all, consumers have the right incentive to authenticate their own drugs!

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Very interesting content, associated with a lot SCM problem in pharmaceutical industry.
I find a dilemma in this article. As writer said, reduce drugs price is a efficient way to resolve counterfeit drugs. However, one of the most efficient way to reduce drugs price is purchasing raw material from outside of U.S., which may have a hight risk to guarantee drugs quality. So, it looks like a hard problem to resolve.

Additionally, I'm very interested in the third recommend of writer, using mobil APP to improve or resolve this problem. Could someone say some specific idea about how to using mobil APP in this case.?